(Reuters) - Canadian oil and natural gas producer Encana Corp, responding to a sharp drop in oil prices, has slashed its dividend by about 79 percent and its 2016 capital budget by more than a quarter.
The company’s shares fell as much as 10 percent on the Toronto and New York Stock Exchanges on Monday.
“The initial guidance that they put up for 2016 was little worse than what most people were expecting on the production side. And there is a risk the numbers could come down further because the guidance was based on WTI of $50,” said Cormark Securities Inc analyst Amir Arif.
U.S. West Texas Intermediate was trading at about $35.56 per barrel at 1625 GMT.
Encana said it expected to produce an average 340,000-370,000 barrels of oil equivalent per day (boepd) next year, down from the 395,000-430,000 boepd it expects to produce in 2015.
The company expects to end 2015 with around 600 fewer staff, down to 2,900 from around 3,500. Around half of this decrease is attributable to natural attrition and divestitures, in which staff transitioned to the purchasing company. The remaining half is attributable to layoffs, Encana spokesman Doug McIntyre said.
Encana, which said in July that it had cut 200 jobs, plans to spend $1.5-$1.7 billion in 2016, compared with $2.2 billion this year.
The Calgary-based company, which cut its dividend for the first time since 2013, joins other oil producers who have reduced or suspended dividend to shore up their finances amid a nearly 70 percent slide in global oil prices since June 2014.
Canadian Oil Sands Ltd has slashed its dividend, while Husky Energy Inc and Penn West Petroleum Ltd have suspended dividends this year.
Encana said on Monday it would cut its annual dividend to 6 cents per share from 28 cents per share in 2015.
The company - focused on the Permian and Eagle Ford shale fields in Texas and Montney and Duvernay shale fields in western Canada - said 95 percent of its budget for 2016 would be directed to these assets.
“While capital spending was in line with expectations, they are getting less production for the same amount of money,” said BMO Capital Markets analyst Randy Ollenberger.
The company’s U.S.-listed shares were down 7.5 percent at $5.59 in mid-morning trade, while its Canada-listed shares were down 7.6 percent at C$7.68.
Reporting by Anet Josline Pinto in Bengaluru; Editing by Ted Kerr and Shounak Dasgupta